Question

High Desert Potteryworks makes a variety of pottery products that it sells to retailers such as Home Depot. The company uses a job-order costing system in which predetermined overhead rates are used to apply manufacturing overhead cost to jobs. The predetermined overhead rate in the Molding Department is based on machine-hours, and the rate in the Painting Department is based on direct labor-hours. At the beginning of the year, the company's management made the following estimates:

	Department
	Molding	Painting
Direct labor-hours	31,500	55,100
Machine-hours	87,000	34,000
Direct materials cost	$185,000	$195,000
Direct labor cost	$277,000	$527,000
Fixed manufacturing overhead cost	$200,100	$528,960
Variable manufacturing overhead per machine-hour	$2.80	-
Variable manufacturing overhead per direct labor-hour	-	$4.80

   

Job 205 was started on August 1 and completed on August 10. The company's cost records show the following information concerning the job:

    

	Department
	Molding	Painting
Direct labor-hours	83	132
Machine-hours	340	74
Materials placed into production	$934	$1,260
Direct labor cost	$700	$980

   

Required:

1.	Compute the predetermined overhead rate used during the year in the Molding Department. Compute the rate used in the Painting Department. (Round your answers to 2 decimal places.)

         

2.	Compute the total overhead cost applied to Job 205. (Round "Predetermined overhead rate" to 2 decimal places, other intermediate calculations and final answers to the nearest dollar amount.)

         

3-a.	What would be the total cost recorded for Job 205? (Round "Predetermined overhead rate" to 2 decimal places, other intermediate calculations and final answers to the nearest dollar amount.)

         

3-b.	If the job contained 37 units, what would be the unit product cost? (Round "Predetermined overhead rate" and final answer to 2 decimal places and other intermediate calculations to the nearest dollar amount.)

         

4.	At the end of the year, the records of High Desert Potteryworks revealed the following actual cost and operating data for all jobs worked on during the year:

  

	Department
	Molding	Painting
Direct labor-hours	33,000	53,000
Machine-hours	86,500	24,700
Direct materials cost	$164,900	$412,000
Direct labor cost	$108,000	$436,000
Manufacturing overhead cost	$452,150	$725,700

	What was the amount of underapplied or overapplied overhead in each department at the end of the year? (Round "Predetermined overhead rate" to 2 decimal places, other intermediate calculations and final answers to the nearest dollar amount. Select "None" for no effect (i.e., zero variance).)

         

Answer 1

1.

Particulars	Molding	Painting
Estimated total overhead	2,00,100	5,28,960
Estimated cost driver	87,000	55,100
Overhead rate	2.30	9.60
Cost driver	Machine hours	Direct labor hours

2.

	Job 205
	Activity level	Rate	OH applied
Molding	340	2.30	782.00
Painting	132	9.60	1,267.20
Total OH applied			2,049.20

3.

		Job 205
Particulars		Molding	Painting	Total
Direct materials		934.00	1,260.00	2,194.00
Direct labor		700.00	980.00	1,680.00
Variable overhead		952.00	633.60	1,585.60
Fixed overhead applied		782.00	1,267.20	2,049.20
Total cost		3,368.00	4,140.80	7,508.80
Production				37
Cost per unit				202.94

4.

Department	Activity level	Fixed OH per hour	Variable OH per hour	Total OH Applied	Actual OH cost	Over/ (under) applied
Molding	86500	2.30	2.80	4,41,150.00	4,52,150	-11,000
Painting	53000	9.60	4.80	7,63,200.00	7,25,700	37,500
Total overhead				12,04,350.00		26,500